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Big tech raked in the profits again. Washington is watching

Apple, Alphabet, Amazon and Facebook all posted huge gains, again raising the question of whether they hold too much power.

Guess who reported profits?
James Martin/CNET

The on-again-off-again romance between Silicon Valley and Washington, DC is starting to look a lot like a Hollywood production. And just like any other franchise worth it's salt, it's all about the sequel. 

Three months ago, four Big Tech moguls pleaded with Congress that their enormous, world-beating companies weren't monopolies. Nothing like it, they told skeptical lawmakers. Competition was fierce, they insisted. In a great plot twist, Apple, Alphabet, Amazon and Facebook all touted second-quarter earnings that would make Midas blush the very next day.

The follow-up, this one focused on free expression on the internet, brought together a similar cast this week. Facebook CEO Mark Zuckerberg, Twitter CEO Jack Dorsey and Sundar Pichai, the boss of Alphabet and its key Google subsidiary, all woke up early for fiery testimony on Wednesday. On Thursday, the sequel came to its inevitable and familiar climax: more superb earnings, even if they weren't quite as dominant as last quarter's. 

It's little surprise tech companies are raking in cash because the coronavirus pandemic has most of us stuck in our homes. Nothing to do? Spend time on Facebook or Google's YouTube video service. Want some political outrage or feel the need to doomscroll? Hello, Twitter. Apple will happily sell you a phone on which to use those services. Amazon will ship just about anything to you -- in two days if you're a member of its Prime delivery program. We're all pretty much captive to Big Tech these days.

Samsung helped set the tone for the earnings deluge, posting a record for quarterly revenue even though consumers can't go to stores to try its products. Smartphones, a product category in the midst of a supercycle as 5G networks come alive, helped fuel the Korean company's 8% jump in sales to 66.96 trillion won ($59 billion).

Here's a quick look at the results: 

  • Facebook blew past revenue and EPS projections, posting $21.47 billion and $2.71 per share, respectively. The number of US and Canadian users dipped slightly from the previous quarter, however an unusual occurrence for the world's biggest social network. 
  • Alphabet, the parent of Google, crushed expectations, tallying a profit of $16.40 per share. Revenue jumped 14%, rebounding from the second quarter, when the company posted the first sales decline in its history.
  • Twitter beat expectations for both revenue and EPS, posting a 4 cent per share profit rather than the 10 cent per share loss that was forecast. The company's user base, however, fell short of the 195.19 million people Wall Street anticipated.
  • Amazon posted $12.37 in earnings per share, nearly triple the performance from a year earlier. Revenue rose 37% to $96.1 billion.
  • Apple reported a decline in profits as consumers waited for its 5G-capable iPhone 12. Despite the dip to $12.7 billion, or 73 cents per share, the company handily beat analyst expectations.

How long the boom will last is anyone's guess, but the evidence, even with the user growth issues at Facebook and Twitter, suggests it won't sputter out soon. The coronavirus is reaching a new and worrisome phase as North America and Europe head into winter, driving more people to social media and online video sites. Facebook, Google and Twitter should have little difficulty selling ads.

Meanwhile, 5G networks are flickering on in many parts of the world. As the networks become wider and stronger, more people will likely upgrade to phones, like Apple's new iPhone 12 series, that have the radios needed to connect to the super speedy cellular service. That will mean more revenue and more profits.

The profitability of Big Tech was a sore point this week with lawmakers, some of whom said they worried the companies put their bottom line ahead of the interests of Americans.

"Social media companies cannot be trusted to put patriotism above profit," warned Sen. Tammy Duckworth, an Illinois Democrat. Similarly, Sen. Ed Markey, a Massachusetts Democrat, said Big Tech's business model put "profits ahead of people."

Already, Washington has begun to rewrite the script along those lines. After months of anticipation, the Justice Department charged Google with misusing monopoly power. Similarly, the Federal Trade Commission is expected to level similar accusations against Facebook in the coming weeks.

All of that sounds like good grist for Washington and Silicon Valley to come together for a third installment in the series. Who knows? Maybe we'll get a preview when fourth-quarter earnings roll around.